Manhattan District Attorney Robert Morgenthau is collaborating in a joint inquiry between US and Italian authorities into what has become one of Europe's biggest corporate scandals, a source familiar with the probe said.

Parmalat is being dubbed Europe's Enron because of the size of the accounting scandal.

It has been forced to seek protection from creditors since its new management revealed a hole of four billion euros in its accounts more than two weeks ago.

The US Securities and Exchange Commission - which filed a complaint last week, alleging that Parmalat committed fraud in the US - is working with other US agencies as it broadens its own probe of more than $1.5 billion of bond sales over the last seven years.

Lawrence West, the associate director of the SEC's enforcement division, returned to the US last week after meeting judicial authorities in Italy.

Lawyer being probed

The role of Calisto Tanzi's lawyer is
also being investigated

The US Attorney's office in Manhattan, headed by interim US Attorney General for the Southern District of New York David Kelley, is also involved with the investigation, according to the source.

US authorities are interested in the allegations because more than half of Parmalat's revenues are generated in North and South America, and US investors bought more than $1.5 billion of its bonds.

As part of the probe, Morgenthau's office is examining the role of Giampaolo Zini, a lawyer for Parmalat founder Calisto Tanzi who kept an office in New York, according to the source.

Police in New York have already searched Zini's Manhattan apartment and office, according to judicial sources in Italy.

A spokeswoman at the District Attorney's office in Manhattan would not confirm or deny whether it had opened an investigation.

A representative for the US Attorney for the Southern District of New York, which often works jointly with the Securities and Exchange Commission, was not available for comment.

In another development on Sunday, the former head of Parmalat's Venezuela operations Giovanni Bonici said he had no part in the scandal and that he planned to return to Italy after his attorney spoke with magistrates there.

Bonici is wanted for questioning by Italian prosecutors.

Banks face losses

The Parmalat crisis has jolted the
Italian business sector

Legal experts say the investment banks that helped Parmalat sell bonds to US investors could be liable for losses if there was reason to suspect that the company's accounting was fraudulent.

The SEC's West said the way the banks sold billions of euros of bonds was being examined, according to Italian newspaper Corriere della Sera.

Banks that have underwritten Parmalat debt sales include Bank of America Corp, JP Morgan Chase & Co, Morgan Stanley and Deutsche Bank, according to industry tracker Dealogic.

However, the SEC is investigating a series of privately placed sales made in the US, and has not yet made public the details of the sales or the investment banks involved.

"We need to understand if they acted in a way that was negligent or reckless or otherwise," West was quoted as saying in the Italian newspaper.

The SEC's investigation is looking at more than $1.5 billion of bond sales made over the last seven years.

Most were private placements of debt sold directly to sophisticated investors like insurance companies.

If the debt sales were made under federal securities Rule 144A, the investment bank has due diligence responsibilities similar to if it were a registered public offering, the lawyer
said.